The 2008 Presidential Campaign (was Obama Phenomenon 2)

[halplm]

Indeed, SF, that hypocricy is one of the ones that annoys me the most. It is also why the Republican party is losing touch with its conservative base...

[solicitr]

There SF I absolutely agree with you. In fact I'll raise you by suggesting that the most flagrant offenders, the ones who knowingly and systematically break the law, should do actual jail time.

But there's no reason I can think of not to increase border security as well. When your ship's taking on water you rig the pumps.... but you also plug the hole. What you can't do is tell the sea to stop sending water in.

[sauronsfinger]

I have no objections to any nation protecting its borders. That is part and parcel with a nations sovereignity. Obviously, the USA has fallen short in that front.

While I have no stats in front of me, I would guess that a good chunk of that 12 million who we hear about came here over regular border checkpoints but overstayed the length they were suppose to be here. The media loves to show the night vision cameras of illegals coming across the desert from Mexico - and that is a problem - but what about the many who come here as tourists, day laborers, temporary workers and simply stay on for good?

If it means that everyone will have to get a government issued ID card - so be it. If it means severe penalties for anyone trafficing in bogus ID cards - thats fine with me too. Adressing the problem at the employment end - which is the motivation - for illegals to be here - is far more attractive than turning the nation into a police state with round-ups, relocation centers, deportations and the such.

[ToshoftheWuffingas]

Or you could save dollars by not subsidising food exports to Mexico.

[Voronwë the Faithful]

So, do people think that Phil Gramm's comments about the "mental recession" and this being a "nation of whiners" will hurt McCain True McCain immediately distanced himself from the comments, but he has consistently identified Gramm as his chief economic advisor. In fact, I remember at one of the debates when McCain was asked about a specific economic policy issue he punted by saying that he would consult with people like Phil Gramm (I wish I could remember exactly which debate it was, and exactly what the question was, but I can't seem to). Gramm may not speak for McCain, but it seems to me that it does say something about McCain's judgment that Gramm has been his chief economic advisor.

[solicitr]

It seems to me that the controversy here is more over Gramm's lack of tact (this is a surprise?) than the quality of his economic advice.

It is something of a frustrating puzzlement that indices like consumer confidence are so far below the actual economic numbers. Of course, it's to certain parties' advantage to pretend things are terrible.....

[Ethel]

It is something of a frustrating puzzlement that indices like consumer confidence are so far below the actual economic numbers. Of course, it's to certain parties' advantage to pretend things are terrible.....

Well... I think that declining consumer confidence probably has a lot to do with eroding home values, and the skyrocketing price of gasoline. Also, a big mortgage bank (IndyMac) failed today, and it won't be the last. Fannie Mae and Freddie Mac are looking like they can only be saved by a federal bailout. I'm not sure Citibank is going to survive. The dollar is trading at .63 Euros. We owe the Chinese getting on for two trillion dollars. The wars in Iraq and Afghanistan are money pits, and the Baby Boomers are beginning to retire--with all the strain that will put on US finances.

You don't have to "pretend" in order to be worried about the economy.

[Ethel]

While I have no stats in front of me, I would guess that a good chunk of that 12 million who we hear about came here over regular border checkpoints but overstayed the length they were suppose to be here. The media loves to show the night vision cameras of illegals coming across the desert from Mexico - and that is a problem - but what about the many who come here as tourists, day laborers, temporary workers and simply stay on for good?

We could stop illegal immigration quite easily if we really wanted to. All we have to do is put real penalties in place against those who employ them. Dry up the jobs and they'll stop coming.

It's not going to happen. The reason it's not going to happen is that so many people profit from the labor of illegal aliens. Who would harvest our crops, bus our tables, mow our lawns, work in the sweatshops in (for instance) the garment district in Los Angeles, then?

[Voronwë the Faithful]

It seems to me that the controversy here is more over Gramm's lack of tact (this is a surprise?) than the quality of his economic advice.

That's true only to the extent that most people didn't realize that Gramm held such radically right-wing economic views (which is to say, they haven't been paying attention). I agree that his comments pretty accurately reflect the quality of his economic advice, which people should have been aware of previously, but apparently were not.

[sauronsfinger]

I had a good friend who kept complaining about serious stomach problems. He self diagnosed himself and said he had a minor stomach ulcer and drank the over counter stuff by the bottle full for a few years. Then he got so bad that he had to go into the hospital or die. He found out he had stomach cancer. He went to one chemo treatment and died a week later.

If you ignore a problem and say it does not exist - then you do not have to do anything about it.

That is why Gramm and others believe what they do about the economy. If there is no problem then they do not have to come up with solutions to treat the problem. And they are loathe to do that since it flies in the face of their almighty philosophy.

Of course, if there is a problem, it could kill you in the end.

[solicitr]

Well... I think that declining consumer confidence probably has a lot to do with eroding home values

Only compared to the bubble prices of a cuple of years back. The 'erosion' is merely a return to where they should have been anyway.

, and the skyrocketing price of gasoline.

Which is bad. But not in itself enough to justify the paranoia

Also, a big mortgage bank (IndyMac) failed today,

Thanks entirely to that sclemiel Chuck Schumer, whose big mouth caused a panic and a run on the bank.

The dollar is trading at .63 Euros.

This is a bad thing????

You think exchange rates are some sort of international penile-length contest? One of our major structural problems is that we import too much stuff, not too little. currency revaluation is a natural self-correction: a negative-feedback control loop.

We owe the Chinese getting on for two trillion dollars.

This is bad. Government spending like a drunken sailor is unforgivable. But do you think Obama is going to change that? At any rate the danger there is long-term, not immediate.

The wars in Iraq and Afghanistan are money pits,

Although total defense appropriations are less than the unconscionable agriculture bill just passed

and the Baby Boomers are beginning to retire--with all the strain that will put on US finances.

Yes: Medicare and Social Security are like a melting snowpack looming over an Alpine village. But which party has tried to reform them, and which one has continually tried to pretend there's nothing to worry about?




As bad as the subprime mess and credit crunch have been, we're still not in recession. Unemployment is close to historic lows, and inflation outside the energy sector is a potential threat but not nearly as bad as I had feared given the oil dance. And the Fed has a lot of room in interest rates.

In short, things aren't great- but they aren't terrible: certainly not so dreadful as to justify Carter-era confidence numbers. I realise that Leftists the world over are happily predicting the collapse of the Capitalist Yankee Empire- but then they've been doing that for years.

[sauronsfinger]

from Solicitr

Medicare and Social Security are like a melting snowpack looming over an Alpine village. But which party has tried to reform them, and which one has continually tried to pretend there's nothing to worry about?

Would you be good enough to put up a link to the plan that you hinted at being offered by one party to reform Social Security? I know of no such plan beyond the vaguest thin privatization ideas floated by the Republicans.

If there is a thorough plan, I would certainly love to read it.

[Ethel]

solicitr, your post deserves a response. I'm not a huge fan of the cut-and-paste approach, but I will attempt to address your points.

Eroding home values:
I do not disagree that the housing market is undergoing a much-needed correction. I lived in California most of my adult life and saw a number of housing bubbles and corrections come and go. I believe the current cycle is different, for several reasons. One is, this correction is so severe in some markets that there are a lot of people out there who owe more on their houses--in some cases as much as twice as much--than they can possibly be sold for. Another is, a number of mortgage brokers broke all the rules when it came to mortgage lending over the last 5 or 6 years: they approved interest-only loans, loans with no down payment, loans with improper underwriting (faked or missing W2's for instance), and other anomalies that allowed people to buy more house than they could afford. As long as prices were rising, it looked smart, and they made a ton of money. Now, chickens are coming home to roost.

What all that means is that we're going to see a lot more foreclosures than we have in the past during a correction. This is a personal disaster for the individual; it's also a disaster for the lender. When you have a loan booked at (say) $400k, and it goes into foreclosure, and you can only sell that OREO for $200k--less legal fees, and multiply that by the number of risky loans you made--you're looking at real trouble.

There's more. It's not just the lending banks/brokers who are in trouble. Most of those problem mortgages were "securitized" and sold as investments. This practice has become popular over the last couple of decades, and for a while it worked very well. Mortgage securities didn't have as high a yield as stocks, but they were considered very safe. A lot of pension funds and so forth invested in them. But with the degraded lending practices of recent years, all the people and institutions who invested in mortgage securities are going to be taking the hit, right along with the imprudent buyers and lenders. It's a long way from over. There will be more bank failures. There will be more huge write-downs in the value of investments. CitiBank alone has written down the value of its mortgage securities by more than 20 billion dollars so far. Wachovia may fail--they are in this up to their necks. And it's not looking good for Fannie Mae and Freddie Mac. Doubt either will survive without a federal bailout.

The failure of IndyMac:
I agree that the leak of Chuck Shumer's letter was not helpful. But IndyMac was already circling the drain. They were one of the very worst offenders regarding poor mortgage loan practices. From my reading, the run on deposits they experienced amounted to withdrawals of about 1.3 billion, on assets of 32 billion. That's about 4%. A bank that can't withstand that simply doesn't have enough liquidity, and probably should have been shut down by their regulators already.

(I am a banker. That is, I run the IT department in a bank, but I'm on the management committee, and this is all we talk about anymore in our meetings. We're fine. We'll survive this. But it affects even well-run banks.)

Weakness of the dollar against other currencies:
Of course I think it's a bad thing that the dollar is trading at .63 Euros today, and you should too. In 2004 it was 1.3 dollars to the Euro. This is a global economy, and we aspire to leadership. Do we want to have the currency that oil is traded in? Do we want to have the currency that everyone in the world wants to invest in? Of course we do. (And honesly--which would you rather invest in at this point? The rising Euro or the falling dollar?) A weak dollar is, as you say, good for selling exports. But if you've already lost the market for technology goods to Asia, how does a weak dollar really help? What do we really have to sell at this point, apart from agricultural goods? We let manufacturing slip away to Asia long ago.

The price of oil:
The big problem here is that it's inflationary. So far, the ones really feeling pain are commuters and the transportation industry. But it's going to ripple out through our economy. There is no sector that will be unaffected. Meanwhile, Fed is trying to hold down interest rates, because if they don't, the impact of the mortgage crisis will be even worse. I fear the combination of the two conflicting influences: cheap money and expensive gas. I fear the result will be that inflation will catch fire, and we'll end up in the horrible place we were in the 1970's and early 1980's: stagflation. It took absolutely crazy interest rates to finally tamp that down--and I give props to Paul Volker for doing it. But it hurt. At one point back then I had an adjustable rate mortgage that went to 14.75%. That depression was long and deep, and I think this one will be longer and deeper. (Why? Because the fundamentals underlying our economy are so much weaker now. Back then we still had manufacturing might, and if anything besides manufacturing creates wealth, I don't know what it is. Now, we've sent most of our manufacturing offshore.)

Then again, what will a Fed Funds rate increase--and it's not a question of if, but of when--do to the mortgage security situation? It won't be pretty. The Fed is walking a tightrope here.

Our trade imbalance with China:
We didn't get where we are because of government spending, unless you include monetary policy. We got where we are because China has cheap labor, and produces goods that Americans want. The reason we owe them all that money is because, for the most part, they used their surplus trade dollars to buy American T-bills. Which is how we finance our debt. In a way, it's very nice of them to reinvest the dollars that way. China is a country where schoolrooms are still unheated in winter, and a lot of business is still conducted by donkey-cart. That's who is subsidizing our out-of-control spending. (Here's what I lose sleep over: What happens when--intentionally or not--we happen to offend the very face-conscious Chinese in a way they feel they have to respond to? What happens when they decide to sit out a T-bill auction? They won't want to destroy our economy. It would hurt them too. But they could. And they know it.)

I want to specifically address your comment, though, even though it was about government appropriations and not the trade imbalance. You said, "Government spending like a drunken sailor is unforgivable. But do you think Obama is going to change that?"

Yes, I do. I'll take the record of Bill Clinton regarding fiscal sanity, any day, compared to that of Ronald Reagan or George Walker Bush. (George Herbert Walker Bush was a different story--he was, in my opinion, quite sound regarding fiscal matters.) Obama strikes me as an essentially cautious and prudent person. I think he's already worrying about US finances. McCain? I think he's dreaming about bombing Iran.

Defense appropriations vs agriculture:
You posted: "Although total defense appropriations are less than the unconscionable agriculture bill just passed." Do you mind me asking where you get your numbers? I felt pretty certain that couldn't be right, but found it wasn't all that easy to lay hands on the actual numbers. I looked around, and what I found was a number of "watchdog" sites that said about 18.1 billion had been appropriated for "big agriculture", versus about 459.3 billion for defense. Which would make the agriculture bill just under 4% of the defense one. Here's one (but not the only) place I found the numbers: http://www.heritage.org/research/featur ... /index.cfm.

(I deliberately linked a right-wing site out of fear you would believe no other.)

Mind you, I completely agree that 18 billion dollars in agricultural subsidies is a disgrace.

Social Security and Medicare:
During the Reagan presidency, there was a commission that looked into how to keep funding these programs in the face of the frightening Baby Boom demographics. They recommended raising the payroll tax and accumulating a surplus to fund it. That would have been a great idea, except for the fact that money is fungible. The taxes were collected, and the program tallied it very nicely... but Reagan and GW Bush spent it, or gave it away in tax cuts for rich people. You consider this reform?

It's not Social Security that's going to kill us, though; it's Medicare.

I support a single-payer health-care system. I believe this would save us a lot of the expenses we are facing with the aging of the Baby Boomers. It's inarguably the case that the capitalist democracies who have gone this route--which is pretty much all of them except us--pay significantly less for health care and report themselves more satisfied by what they get. That's my solution. It probably won't happen, because there are too many interest groups with their hands out. But it works elsewhere.


I am not an economist. Maybe I'm all wet. These are my personal observations.

[solicitr]

Without covering all your points, Ethel, as fully as they deserve:

What do we really have to sell at this point, apart from agricultural goods? We let manufacturing slip away to Asia long ago......Back then we still had manufacturing might....... Now, we've sent most of our manufacturing offshore.)

No, we haven't. The US’ share of global manufacturing output has actually increased slightly since 1980. Japan's and the EU's have fallen appreciably. We are still by far the world's largest manufacturer, producing a whopping 21% of the world's industrial output.

The US' manufacturing output all-time peak (inflation-adjusted) was in 2006. Same for manufacturing exports. Our manufacturing sector is two and a half times the size of China's.

So don't talk about the 'decline of American manufacturing.' It just ain't so. The consumer products ordinary folks see every day don't remotely tell the whole story: there's more stuff being made than just cars and TVs. Just because Rust Belt factories have closed doesn't mean we're not making things: we're just making different things.



(BTW, Jny, if you read this- I was pleasantly surprised to see that productivity growth has actually been faster since 2000 than it was in the 80s or 90s).



But I really can't concur with you, Ethel, in this:

if anything besides manufacturing creates wealth, I don't know what it is.

I would instead have to agree with Don Boudreaux:

I have never believed that making things is inherently better -- inherently more likely to produce widespread prosperity, inherently more noble, inherently more meaningful -- than is the supplying of services. And until I notice a widespread pattern of parents hoping that their children grow up to become factory workers rather than to become doctors, lawyers, and bank presidents, I'll continue to believe that.

-------------

This is a global economy, and we aspire to leadership. Do we want to have the currency that oil is traded in? Do we want to have the currency that everyone in the world wants to invest in? Of course we do.

Of course we do? You're making appeals to ego. I don't mean this in anything but the friendliest way, but are you sure you haven't been caught up by a sort of virility-view of economics? A big, tough dollar coming from big, tough people in big, tough factories? My father thought that way, and it took me a long time to learn that he was mistaken.

[sauronsfinger]

from solicitr

So don't talk about the 'decline of American manufacturing.' It just ain't so.

This comes from the Congressional Budget Office

The manufacturing sector of the U.S. economy has experienced substantial job losses over the past several years. In January 2004, the number of such jobs stood at 14.3 million, down by 3.0 million jobs, or 17.5 percent, since July 2000 and about 5.2 million since the historical peak in 1979. Employment in manufacturing was its lowest since July 1950

I will look for the most current numbers after posting this.

[sauronsfinger]

This is from an article written by USA Today writer Barbara Hagenbaugh dated 12/12/02

Fifty years ago, a third of U.S. employees worked in factories, making everything from clothing to lipstick to cars. Today, a little more than one-tenth of the nation's 131 million workers are employed by manufacturing firms. Four-fifths are in services.

The decline in manufacturing jobs has swiftly accelerated since the beginning of 2000. Since then, more than 1.9 million factory jobs have been cut — about 10% of the sector's workforce. During the same period, the number of jobs outside manufacturing has risen close to 2%.

[sauronsfinger]

This was written by someone you might recognize - hardly a left wing liberal......

Every month George Bush has been in office, America has lost manufacturing jobs. One in seven has vanished since his inauguration. In 1950, a third of our labor force was in manufacturing. Now, it is 12.5 percent. U.S. manufacturing is in a death spiral, and it is not a natural death. This is a homicide. Open-borders free trade is killing American manufacturing.

that was taken from The American Conservative August 11, 2003 - the writer is one Patrick J. Buchanan

[sauronsfinger]

and more for you solicitr....
this one from The Insitiute for Southern Studies giving some very recent figures in a report datedMarch 7, 2008

Today's job report coming out of the Bureau of Labor Statistics has some grim news: for the first time in eight five years*, the country has seen two straight months of job losses. The net job loss for February was 22,000.

The BLS statistics show (pdf) that the downturn was driven by job losses in manufacturing, where nearly 300,000 jobs have been lost over the last year. 83% of the job losses in February alone were in manufacturing:

Manufacturing employment continued to decline in February (-52,000), bringing losses over the past 12 months to 299,000. Most of the February decline was concentrated in durable goods manufacturing, as motor vehicles and parts (-13,000), furniture and related products (-6,000), and wood products (-5,000) lost jobs. Within nondurable goods, employment fell in printing and related support activities (-5,000).

Do you still stand by your previous statement?

So don't talk about the 'decline of American manufacturing.' It just ain't so.

[sauronsfinger]

and a bit more this time for the official Bureau of Labor Statistics in their report of Feb 14, 2008.

Major Industry Sector Gross Job Gains and Gross Job Losses

Goods-producing. Expanding and opening establishments in the
goods-producing sector accounted for 1,622,000 jobs gained, and
contracting and closing establishments accounted for 1,691,000 jobs
lost. This net loss of 69,000 jobs was the fourth consecutive
quarter of net loss in this sector. (See tables B and 3.)

Construction. In construction, gross job gains fell over the
quarter to 814,000 and gross job losses increased to 855,000,
resulting in a net loss of 41,000 jobs.

Manufacturing. Gross job gains in manufacturing increased to a
level of 522,000 jobs in the second quarter of 2007, and gross job
losses fell to 567,000, resulting in a net loss of 45,000 jobs. This
was the fourth consecutive quarter of net job losses for this
industry.

Note that these three categories: Goods producting, construction and manufacturing tend to be blue collar higher wage jobs with good benefits.
The categories of biggest job gains tend to be in service related areas which are usually low paying and have lower benefits.

How many people do we need to say "welcome to Wal Mart"?

[Voronwë the Faithful]

sf, you really should back up your claims with some statistics.

(Well done.)